MIT in debt $65,000 to FedEx

By Andrea Lamberti

and Reuven M. Lerner

Federal Express informed MIT on January 8 without warning it would no
longer service MIT's accounts on a line-of-credit basis, Director of
Purchasing and Stores Barry M. Rowe said yesterday. MIT had almost
exclusively used Federal Express previous to the announcement.

The termination came as a result of MIT's "failure to promptly pay for
the services [Federal

Express] provides," Rowe said in a January 10 memorandum to Institute
department heads, laboratory and center directors, and

other members of the MIT community.

"The announcement was unexpected since we had been working closely with
Federal to improve our systems and procedures to enable faster payment of
their invoices," the memo continued.

"This is the first time a company that has serviced us so completely has
ever taken such drastic action," Rowe said yesterday. A spokeswoman from
the Federal Express office in Boston said that it is "not unusual for us to
do that if we are attempting to reconcile statements."

MIT is $65,000 in arrears, according to Rowe. He said that companies are
generally allowed 30 to 60 days to reconcile their debts. MIT owed Federal
express $40,000 for the past 30 to 60 days, $3,000 for the 30 days before
that, and another $2,000 for the month previous to that. Rowe said that the
problem stemmed from an additional $22,000 that

were owed more than 120 days before. He said the decision to terminate
credit line service to MIT hinged on this early debt.

Rowe claimed that the responsibility for the large debt is shared by both
MIT and Federal Express. His memo cited "the continued failure [of MIT] . .
. to indicate the Institute account number" on the airbill form as a

reason for the slowness in payments. Airbills are necessary to confirm and
trace shipments in the case of a missing account number. Moreover, account
numbers that were indicated on the airbills "were not picked up by data
entry people" at the Federal Express center in Memphis. In addition, many
of the numbers that were entered were incorrect or garbled, Rowe said.

Federal's refusal to provide copies of airbills with their invoices also
accounts for the breakdown in communications that occurred between MIT and
Federal. Because invoices are not attached to the airbills, missing account
numbers could not be

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traced after the debt started to grow, Rowe said.

According to Rowe, Federal Express is a large operation, with "a lot of
sloppiness in data entry." MIT is finding "a great many errors in [their]
efforts to clean" up the accounting problems.

The problem was compounded when MIT asked Federal Express to send back
the airbills from the delinquent accounts, but the airbillssent
"did not relate to the problem," Rowesaid. MIT could not trace the
account numbers, for many of the invoices did not even belong to MIT.
Roweadded that "we are working extra-heavy now to resolve the
problem."

"Anytime you have a large number of departments shipping, sometimes it's
difficult to reconcile the problems . . . we are working very closely with
MIT," the Federal Express spokeswoman said, and "we are confident it is
going to be worked out."

[el1l]

Other companies called in

As soon as word leaked out that Federal Express had dropped MIT's
account, "all of the major carriers contacted us," Rowe said. He estimated
MIT's annual shipments at $400,000 to $500,000 per year. Although Federal
Express's treatment of MIT's account was unfair, according to Rowe, the
account will probably be reinstated once the problems are resolved. In the
interim, the Institute has been using DHL Worldwide Courier Express and
Emery Worldwide, although if people "want to use Federal, they can use
Federal," he continued.

A spokesman for Emery refused to comment, and DHL did not return our
telephone calls.

"Federal Express is anxious to get us back. They are bending over
backwards to get us back as an account," Rowe said. He said that Federal
Express will still pick up and deliver packages, but bills may not be
charged to an MIT account.

Both DHL and Emery have been instructed not to accept a parcel if the
accompanying airbill does not have an account number.

"DHL has been doing a fine job; everyone seems to be using DHL, and is
doing just fine," Rowe said.

"I really want to get Federal Express back; they are open a lot later
than DHL," commented Terri Lehane, administrative assistant in the Center
for Transportation Studies. Federal Express picks up parcels much later
than the other companies, making it convenient for late deliveries.

"I'm hoping that MIT gets them back," she said. "DHL is good service, but
Federal gives excellent service."

A source who wished to remain anonymous said "that [both MIT and Federal]
tried to pin [the source of the problem] on the clerical help." The source
said that while it was true "a lot of people" didn't put account numbers on
the airbills, the design of the form was "pretty bad."

"It was easy to send out a bill without one of the account numbers," she
said.